Financial Advisers’ Use of ETF Accounts Set to Grow: Cogent

All types of managed money solutions used by fee-based advisers are expected to grow over the next two years, but the use of exchange-traded, fund-managed accounts will far outpace adoption of other solutions.

That’s according to a new Cogent Reports study from Market Strategies International, Advisor Trends in Managed Accounts.

On a net basis, the proportion of fee-based advisers expecting to increase their use of ETF advisory/wrap accounts (23%) is three times the proportion who expects to increase their use of mutual fund advisory/wrap accounts (7%), the data showed.

Three quarters (76%) of fee-based advisers now use some type of managed account solution within their practice, accounting for 61% of their total assets under management, on average, according to the report. Mutual fund wrap programs and rep-as-adviser models are currently the most commonly utilized advisory platforms.

However, over the next two years, growth for each platform will be stymied by significant proportions of advisers who plan to pull back from using these solutions, the findings revealed.

By contrast, one in four (24%) fee-based advisers plans to expand their use of ETF wrap accounts, while virtually none (1%) say they plan to decrease use.

“The proliferation of ETF products and investment strategies make building a managed solution around these products quite attractive to advisors, especially as they become more comfortable with ETFs in general,” said Meredith Lloyd Rice, senior product director and author of the study from Market Strategies International.

Cogent Reports conducted an online survey with 1,694 fee-based advisors in March and April of this year. Survey participants were required to have an active book of business of at least $5 million, and offer investment advice or planning services to individual investors on a fee or transactional basis.